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Crucial Decisions: Saving Money for Retirement or Your Kids’ College?

Daily financial struggles can transcend to something even more important: your family’s future. If you think you don’t have the resources to save for both your retirement and your kids’ college, there are several facts you need to consider before you choose one over the other.

parents no money

You Can Borrow for College, but Not for Retirement

People use loans to buy cars, to buy homes, to go on vacation, to start businesses and to go to college, but no one takes out a loan to retire.

Students and their parents have several options when it comes to obtaining loans for higher education. This includes federal loans (like Stafford and Perkins loans), institution loans, state loans, and private loans.

While asking your child to go into debt in order to go to school is not the ideal start to college, it will spare you from dipping into your precious retirement fund. If your child works hard in college and gets a good job afterward, he or she will have the resources to tackle that debt in a timely manner.

It is Better to Make Interest Work for You

Make interest work for you

One expert who helps people manage their retirement portfolios, quoted on usnews.com, points out, “You can take out student loans for 3.8 percent, or you can put your money in a diversified investment portfolio across stocks and bonds, and you’re going to average closer to 8 percent. If you look at the numbers with the same dollar amount, investing in retirement, you’re going to be way ahead.”

Each family has its own financial circumstances, so weighing retirement investments involves more than comparing projected earnings from a savings plan against what you would pay on a student loan. A heart to heart with a financial expert can help you sort through all the factors and make a wise decision.

You Want to Avoid Becoming a Burden

Another reason to favor saving for retirement over saving for your kids’ college is that things happen. If you pour your financial resources into a college savings plan while you ignore your retirement needs, you tread on dangerous ground.

If illness befalls you or some other incident compels you to retire early and you don’t have a nest egg, that child that you sent to school could end up feeling like he or she has to serve as your lifeline. You probably wouldn’t directly ask your children for help, but they will still feel obligated to give it.

Retiring is Tough

A climbing average retirement age in the US goes hand in hand with the fears and uncertainties that surround stepping away from a steady income job. Many people who are nearing retirement age don’t even know how much money they will need to live comfortably for the rest of their lives once they leave the workforce.

Carefully planning your retirement and saving accordingly will spare you from much anxiety, and you will not need to rely on a Social Security system that may or may not survive the coming decades.

Maybe You Don’t Have to Choose

ethics-scale

Choosing to save for your retirement instead of your children’s education does not mean your kids have to stop learning after high school. You can still help get them to college by:

  • Keeping a roof over their heads while they are in school. They can go to a local community college for a couple of years before transferring to a university. This means big savings on tuition and lodging.
  • Encouraging them to take online classes. Making your home into a classroom saves on transportation and other living expenses. Working on the Internet, students can get a geriatric nursing degree or any number of other degrees that open doors to rewarding careers.
  • Helping them make wise choices in high school. Many high schools offer advanced placement courses that count for college credit. Some states have programs that allow high school juniors and seniors to attend a community college without paying tuition. Also encourage your kids to apply for scholarships.

You want your children to get an education, but you dread the thought of sacrificing your retirement. With sound planning and some expert guidance, you can see your kids attend college and not worry that you’ll miss out on the fun of your golden years.

About Jess

Jess hails from Sunny Australia and is the youngest of the frugal ladies. She loves shopping for a bargain, reading, watching movies and spends most of her life on the beach
  • homelifeabroad

    I wish my parents had put more thought into savings for college. I ended up having to work, study and be on scholarships with high GPA requirements in order to finish my degree. A lot of work!

  • Kung Phoo

    It is very hard tI work with a financial adviser but it is not working out the way i would like it to, Thanks for the tips..

  • Jennifer Van Huss

    Great post! I agree it is hard to decide which way to go! I never thought of it in terms of you can borrow for kids but not retirement! Good thing to keep in mind

  • Homayra Shaikh

    Great tips! Being from Canada where university/college is much more affordable, I nor my parents had to struggle between saving exclusively for college or retirement, but it’ll be a decision I’ll face in the future in the states now. I think it’s risky doing only either or, yes one can be more of a priority, but both are important, wiser to sacrifice on other unnecessary expenses such as lengthy vacations if you have to.

  • http://thernylife.com/ Hilary

    Great post. A lot of great points. It’s definitely a hard choice but it’s nice to see that it’s possible to do both